UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended April 30, 1997 Commission file number 0-8454 JLG Industries, Inc. (Exact name of registrant as specified in its charter) Pennsylvania 25-1199382 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1 JLG Drive, McConnellsburg, PA 17233 (Address of Principal Executive Offices) (Zip Code) (7l7) 485-5161 	Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _________ At May 22, 1997, there were 43,706,232 shares of capital stock of the Registrant outstanding, and the aggregate market value of the voting stock held by nonaffiliates of the Registrant at that date was $620,186,273. PART I FINANCIAL INFORMATION JLG INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) April 30, July 31, 1997 1996 (Unaudited) ASSETS Current assets Cash $10,274 $30,438 Accounts receivable 74,291 54,342 Inventories: Finished goods 31,480 12,925 Work in process 15,945 13,972 Raw materials 13,093 12,536 60,518 39,433 Future income tax benefits 3,997 3,908 Other current assets 3,699 741 Total Current Assets 152,779 128,862 Property, plant and equipment - net 45,034 34,094 Equipment held for rental - net 22,050 13,459 Other assets 8,655 6,213 $228,518 $182,628 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt $174 $243 Accounts payable 35,586 34,535 Accrued expenses 27,273 22,277 Total Current Liabilities 63,033 57,055 Long-term debt, less current portion 1,861 1,951 Other liabilities and deferred credits 11,716 10,414 Shareholders' equity Capital stock: Authorized shares: 100,000 at $.20 par Outstanding shares: Fiscal 1997- 43,706 shares; Fiscal 1996- 43,382 shares 8,741 8,676 Additional paid-in capital 10,775 7,879 Equity adjustment from translation (2,158) (2,060) Retained earnings 134,550 98,713 Total Shareholders' Equity 151,908 113,208 $228,518 $182,628 The accompanying notes are an integral part of these financial statements. JLG INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended April 30, April 30, 1997 1996 1997 1996 Net sales $143,642 $113,217 $385,093 $287,476 Cost of sales 107,951 81,921 285,703 212,228 Gross profit 35,691 31,296 99,390 75,248 Selling, general and administrative expenses 14,613 12,145 41,380 31,702 Income from operations 21,078 19,151 58,010 43,546 Other income (deductions): Interest expense (183) (145) (276) (248) Miscellaneous, net (385) 164 187 563 Income before taxes 20,510 19,170 57,921 43,861 Income tax provision 7,589 6,709 21,431 15,351 Net income $12,921 $12,461 $36,490 $28,510 Net income per share $.30 $.28 $.84 $.65 Dividends per share $.005 $.0033 $.015 $.01 Weighted average shares outstanding 43,646 44,568 43,567 44,201 The accompanying notes are an integral part of these financial statements. JLG INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended April 30, 1997 1996 OPERATIONS: Net income $36,490 $28,510 Adjustments to reconcile net income to cash provided by (used for) operating activities: Depreciation and amortization 6,591 4,633 Provision for self-insured losses 2,100 2,280 Deferred income taxes 142 50 45,323 35,473 Changes in operating assets and liabilities (38,145) (20,645) Changes in other assets and liabilities (3,224) (2,229) Changes in equipment held for rental (9,871) (6,241) Cash (used for) provided by operations (5,917) 6,358 INVESTMENTS: Purchases of property, plant and equipment (16,297) (7,457) FINANCING: Repayment of long-term debt (159) (257) Payment of dividends (654) (431) Proceeds from exercise of stock options 2,960 1,817 Cash provided by financing 2,147 1,129 CURRENCY ADJUSTMENTS: Effect of exchange rate changes on cash flows (97) 74 CASH: Net (decrease) increase (20,164) 104 Beginning balance 30,438 12,973 Ending balance $10,274 $13,077 The accompanying notes are an integral part of these financial statements. JLG INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS April 30, 1997 (unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results for the three months and nine months ended April 30, 1997 are not necessarily indicative of the results that may be expected for the fiscal year as a whole. For further information, refer to consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended July 31, 1996. NOTE B - NET INCOME PER SHARE Net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period and, for fiscal 1996, dilutive stock options outstanding for the period. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted for periods ending after December 31, 1997. Earlier application is not permitted. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of options will be excluded. The impact is expected to result in an increase in earnings per share for the three and nine months ended April 30, 1996 of $.01 per share. No change is anticipated for the fiscal 1997 comparative amounts. The impact of Statement 128 on the calculation of fully diluted earnings per share is not expected to be material. NOTE C - INVENTORIES AND COST OF SALES A precise inventory valuation under the LIFO (last-in, first-out) method can only be made at the end of each fiscal year; therefore, interim LIFO inventory valuation determinations, including the determination at April 30, 1997, must necessarily be based on management's estimate of expected fiscal year-end inventory levels and costs. NOTE D - COMMITMENTS AND CONTINGENCIES The Company is a party to personal injury and property damage litigation arising out of incidents involving the use of its products. The Company's insurance program for fiscal year 1997 is comprised of a self-insured retention of $5 million and catastrophic coverage of $25 million in excess of the retention. The Company contracts with an independent insurance firm to provide claims handling and adjustment services. The Company's estimates with respect to claims are based on internal evaluations of the merits of individual claims and the reserves assigned by the Company's independent insurance carrier. The methods of making such estimates and establishing the resulting accrued liability are reviewed frequently, and any adjustments resulting therefrom are reflected in current earnings. Claims are paid over varying periods, which generally do not exceed five years. Accrued liabilities for future claims are not discounted. With respect to all claims of which the Company is aware, accrued liabilities of $9.3 million and $8.9 million were established at April 30, 1997 and July 31, 1996, respectively. While the Company's ultimate liability may exceed or be less than the amounts accrued, the Company believes that it is unlikely that it would experience losses that are materially in excess of such reserve amounts. As of April 30, 1997 and July 31, 1996, there were no insurance recoverables or offset implications and there were no claims by the Company being contested by insurers. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is the world's leading manufacturer, distributor and international marketer of mobile elevating work platforms used primarily in industrial, commercial, institutional and construction applications. Sales are made principally to independent equipment rental companies that rent the Company's products and provide service support to equipment users. Equipment purchases by end-users, either directly from the Company or through distributors, comprise a significant, but smaller portion of sales. The Company also generates revenues from sales of used equipment and from equipment rentals and services provided by its JLG Equipment Services operations. Results for the Third Quarters of Fiscal 1997 and 1996 Sales for the third quarter of fiscal 1997 were a record high of $143.6 million, an increase of 27% over fiscal 1996's third quarter sales of $113.2 million. The increase was 35% when sales from the Company's divested Material Handling Division are excluded from fiscal 1996 sales for comparative purposes. The growth in sales was generally across all product classes and geographic markets. Sales to customers outside the United States were 27% and 21% of total sales for the third quarter of fiscal 1997 and 1996, respectively. Sales from new and redesigned products introduced over the past two years represented 51% of sales for the third quarter of fiscal 1997. Gross profit, as a percent of sales, was 25% for the third quarter of fiscal 1997 compared to 28% for the same period of fiscal 1996. The decrease in gross profit percent between the comparative periods was primarily due to a shift in product mix to smaller, less profitable models and the effect of increased sales discounts related to higher volume purchases and increased participation in Company incentive programs. Selling, general and administrative expenses were $2.5 million higher in the third quarter of fiscal 1997 compared to the same quarter last year, but were .5% lower as a percent of sales. The dollar increase included higher personnel and related costs; increased consulting, retirement and travel and entertainment costs; and higher selling expenses associated with increased international business. These increases were partially offset by elimination of costs associated with the divested Material Handling Division and lower bad debt and product development costs. The effective income tax rates were 37% and 35% for the third quarter of fiscal 1997 and 1996, respectively. The lower effective rate for the fiscal 1996 third quarter was due to projected tax benefits related to export sales. Results for the First Nine Months of Fiscal 1997 and 1996 Sales for the first nine months of fiscal 1997 were a record $385.1 million, an increase of 34% over the previous year's comparable period. The increase in sales reflected generally stronger demand across all product classes and markets. Excluding the divested Material Handling Division, the increase was 42%. Sales to customers outside the United States were 29% and 25% of total sales for the first nine months of fiscal 1997 and 1996, respectively. Sales from new and redesigned products introduced over the past two years represented 46% of sales for the nine month period of fiscal 1997. Gross profit, as a percent of sales, was 26% for both the first nine months of fiscal 1997 and fiscal 1996. The effect of higher prices for the first nine months of fiscal 1997 was partially offset due to a shift in product mix to smaller, less profitable models; the effects of increased sales discounts related to higher volume purchases and increased participation in Company incentive programs; and costs related to the introduction of a large number of new products. Selling, general and administrative expenses were $9.7 million higher in the first nine months of fiscal 1997 compared to same period last year, but were 11% of sales for both periods. The dollar increase was essentially due to the same factors as discussed in the third quarter comparison. The effective income tax rates were 37% and 35% for the first nine months of fiscal 1997 and 1996, respectively. The factor effecting the lower percentage for the first nine months of fiscal 1997 is the same as discussed in the third quarter comparison. Financial Condition The Company continues to maintain a strong financial position, funding capital projects and working capital needs out of operating cash flow and cash reserves, while remaining virtually debt-free. Working capital increased $17.9 million to $89.7 million at April 30, 1997 principally as a result of increased sales growth, including higher inventory and receivable levels to support increased international business. At April 30, 1997, the Company had unused credit lines totaling $26.2 million and cash balances of $10.3 million. The Company also intends to finance $3 million of capital projects with borrowed funds. The Company considers these resources, coupled with cash expected to be generated by operations, adequate to meet its planned funding needs. Planned major items through July, 1997 are approximately $3 million to further expand the JLG Equipment Services fleet of rental machines and $1.3 million to complete the expansion of the Company's new scissor lift plant. The Company plans to spend $7.2 million for construction of its boom lift manufacturing capacity expansion to be completed by the end of calendar 1997. The Company's exposure to product liability claims is discussed in Note D -- Commitments and Contingencies. Future results of operations, financial condition and liquidity may be affected to the extent that the Company's ultimate exposure with respect to product liability varies from current estimates. Outlook This Outlook section and other parts of this Management's Discussion and Analysis contain forward-looking information and involve risks and uncertainties that could significantly impact expected results. Certain important factors that, in some cases have affected and in the future could affect, the Company's results of operations and that could cause such future results of operations to differ are described in "Cautionary Statements Pursuant to the Securities Litigation Reform Act" which is an exhibit to this report. Despite the record third quarter results, the Company's domestic order rate softened during the quarter. The contributing factors include lower than expected customer rental fleet utilization rates, reflecting the high level of product deliveries during the traditionally slower winter months and prolonged severe weather conditions in some parts of the country; delayed orders from a large customer related to project delays by its end-user customers; and changing customer order patterns due to improved Company product delivery lead- times. Rental fleet utilization rates for domestic customers did improve modestly in April, but they have not returned to the higher levels that helped support demand throughout most of 1995 and 1996. In response, management is redoubling the Company's cost reduction efforts and appropriately adjusting its production plans and employment levels. Nevertheless, based on customer confidence that domestic rental demand will continue to recover, due in part to the onset of better spring weather and predictions that nonresidential activity will remain robust, management believes that the Company's order rate should likewise improve. Although management's outlook is somewhat uncertain due to the recent order softness, management believes that the fourth quarter will set another record and that margins should continue to reflect the same factors as in the third quarter. Ernst & Young LLP Independent Accountants' Review Report The Board of Directors JLG Industries, Inc. We have reviewed the accompanying condensed consolidated balance sheet of JLG Industries, Inc. and subsidiaries as of April 30, 1997, and the related condensed consolidated statements of income for the three-month and nine-month periods ended April 30, 1997 and 1996, and the condensed consolidated statements of cash flows for the nine-month periods ended April 30, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of JLG Industries, Inc. as of July 31, 1996, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended, not presented herein, and in our report dated September 3, 1996, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of July 31, 1996, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP Baltimore, Maryland May 12, 1997 PART II OTHER INFORMATION ITEMS 1 - 5 None/not applicable. ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein: 	15	Letter re: Unaudited Interim Financial Information 	27	Financial Data Schedule 	99	Cautionary Statements Pursuant to the Securities Litigation 	 		Reform Act (b) The Company was not required to file Form 8-K pursuant to requirements of such form for any of the three months ended April 30, 1997. 	SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized who is also signing in his capacity as principal financial officer. JLG INDUSTRIES, INC. (Registrant) /s/ Charles H. Diller, Jr. Charles H. Diller, Jr. Executive Vice President and Chief Financial Officer